Primoris Services Corporation (PRIM) Q1 2015 Earnings Report, Transcript and Summary

Greetings and welcome to the Primoris Services Corporation First Quarter 2015 Financial Results Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder this conference is being recorded. It is now my pleasure to introduce your host. Kate Tholking, Director of Investor Relations. Thank you may begin.

Thank you, Jessica. Hello everyone and thank you for joining us today. Our speakers for today will be Brian Pratt, our Chairman, President and Chief Executive Officer of Primoris Services Corporation. Peter Moerbeek, Executive Vice President and Chief Financial Officer and David King, our Chief Operating Officer. Before we start, I'd like to remind everyone that statement made during today's call may contain certain forward-looking statements including with regard to the company's future performance. Words such as estimated, believes, expects, projects, may and future or similar expressions are intended to identify forward-looking statements. Forward-looking statements inherently involve risks and uncertainties including without limitation those discussed in this morning's press release and those detailed in the risk factors section and other portion in our Annual Report on Form 10-K. for the period ended December 31, 2014 and our quarterly report on Form 10-Q which we plan to file later this week and other filings with the Securities and Exchange Commission. Primoris does not undertake any obligation to publicly update or revise any forward-looking statements whether the result of new information, future events or otherwise, except as maybe required under applicable securities laws. I'd now like to turn the call over to our CEO, Brian Pratt.

Thank you, Kate and good morning to everyone. Well we had another tough quarter. I'd like to excuse it away, but the number is, what the number is. I will, however, try to explain our disappointing results. Our just about breakeven income can be attributed to two significant factors neither of which should come as a surprise to you, weather and market uncertainty. As to the weather, it was cold in the Rockies in the Midwest where Q3 C operates. Q3 C in Denver unlike last year when we had a considerable number of work days available to us in the area, we didn't this year. The upper Midwest was about normal this year with zero available work days and too wet in the southeast where we're working with two of our three segments east and energy. By way of example, we had 55 days of rainfall in Houston area, where much of our work is performed. If you can't put work in place or provide maintenance services to your client. You obviously don't generate revenue and therefore profit. So not only did poor weather inhibit revenue but it also did so for some of our most profitable groups. The second challenge was market uncertainty which created a degree of malaise for some of our clients. The precipitous drop in crude prices created tough market conditions even with clients fairly disconnected from crude prices. Some clients in the industry’s most affected are sincerely struggling with perspective project returns and or current cash flows. While others are exploiting a "buyer's market" to attempt to extract better terms of pricing. These factors certainly contribute to our first quarter result with revenue $77 million less than last year. To-date we have not seen major project cancellations as a result of lower crude prices nor will we expect to, in most of our end markets. Instead is the general uncertainty that seem to cause some clients to pause and take a closer look before moving ahead with their projects. As crude prices appeared to have stabilized and our clients are using the current price matrix for hydrocarbons and project evaluations. We feel that the market effected are somewhat firming. While these factors produced a first quarter below our expectations, the firming energy markets another markets insulated from the oil and gas prices produce proposal winds increase in our backlog to the highest level on our history of $2.1 billion. Before I am asked to question, I like to say I do like the quality of our backlog. Now before I discuss the segments I'd like to introduce David King, our COO. Dave has joined us on the call to act as my human shield in the Q&A period. David?

Thanks, Brian. As Brian has mentioned on the past over earnings call. I'm Primoris' Chief Operating Officer. Having come on board late last year, as many of you know I come from an operations background, having worked for more than 35 years in this business. This last year has been an exciting year for me inside the company, getting to know everyone and all of the different business units inside this great organization. The entrepreneurial spirit and the capabilities of this organization has been very exciting for me to experience firsthand. Although, I've already had the opportunity to meet many of you and many of our end customers. I do look forward to the opportunity interface even more in the coming years. Thanks Brian.

Okay, now to the segments. In the West, Scott's ARB underground division enjoyed a reasonable revenue and profitability in the first quarter with $5 million increase in gross profit. His group not only had a better than average first quarter, but saw a good flow perspective work in lengths. By the way and you may have noticed there wasn't any rain in Cali. Cali is the only state that didn't rain and it was California. This group continues to perform more and more varied services for its traditional clients expanding those relationships. Rockford is performing their projects well in spite of difficult weather and we're hoping to increase our workload in the second half, while bidding and winning work to be performed well in the 2017. On the industrial side in the West, Tim's group while fact dearth of immediate work are in final discussions on several significant projects that hopefully will provide attractive work in the intermediate future. Finally in the west, the structures group headed by Mark Thurman has turned the corner and is seen vigorous market and we are enjoying a strong position in it. Mark's recent wins indicate his traditional market is returning to more normal levels and our patience with it will be rewarded. In the East Services segment, we produce mixed results. While the James' industrial team group is laboring to replace our larger projects from last year like CF. We are seeing good prospect flow. Along with new projects, we look to book the group will be a significant contributor on the Sasol project. Although the size of their portion is larger than the I&M's their work will be performed mostly in the later stages of the project. Other work in the market has changed from largely more reimbursable environment to one of increased component of competitive bid. This is an environment in which we do better as I think we're very competitive as a company and competition is something, we thrive on. Saxon continued their profitable run and made positive contribution for the quarter. A major consideration in the purchase of Saxon was that, as the power market heats up in the Southeast we look for them to become more of a player in that market. Ram-Fab performed okay for the quarter, as they are struggling with closing out a legacy project. Some of their issues relate to our acquisition of this business and we're dealing with those issues with the client. They're not the type of problems we expect to encounter in the future. We remain very excited about this group and are looking to build a larger presence in the fabrication market. This is indicated by their purchase just recently of an additional shop facility in New Iberia, Louisiana area to enhance this operation. And final to the group is OnQuest, this group's heater business is expanding with significant new orders and process. This rebound in the heater business is occurring, while their LNG business continues to blossom. We commissioned the George West facility for Stabilis in the first quarter. The Florida LNG project we're building for a different client is proceeding as scheduled. I'm very optimistic for the small scale LNG processing construction industry and we remain the preferred provider of these plants. In the East, where most of our projects involve moving dirt. Weather is especially impactful. That being said our I&M Group was finally able to kick off the Sasol project in a substantial manner and we look for a sizable contribution from this job over the next several years. Jonas Beatty has done a great job of shepherding this group and we believe he is more than up to the challenge of performing a large job like the Sasol one, while maintaining our relationship with our ongoing maintenance clients. Heavy Civil was impacted by the weather, is maintaining progress on their multi-year projects throughout the Southeast. Mike Kilgore, who recently moved to head of the organization is doing a good job in effectuating the changes needed. Rodney James has assumed the role of Operations Manager for Heavy Civil and is settling into his new responsibilities well. I have great confidence in both of these gentlemen. Cardinal, our water and wastewater team under the leadership of Richard Holt is moving towards better markets due to the improvement of legacy markets and our focus on new and upscale markets. We think, they will be a better and better contributor to our total results. Now to M&A. The recent downturn in valuations of companies in our space is been dramatic. It has obviously created pain for investors, but also opportunity. As a historic and successful acquirer, it is times like this that allow us to create opportunity for our shareholders by purchasing the right kind of companies to help us grow and add value. Environments like this, allow us to add strong companies at reasonable prices bring in a new or a larger dimension to an already great company. We are working hard, to find these accretive companies and feel like there are several within our grasp as evidenced by our purchase of a Aevenia. We're hoping to have an announcement in the next announcement or two in the next several months that will demonstrate our ability to find and secure these companies. Now I'd like to turn the call over to Pete, to provide his normally enthralling analysis of our numbers. Pete?

Thank you, Brian. As Kate mentioned, we anticipate filing our Form 10-Q at the end of the day tomorrow. Without repeating too much of the information that was in our press release this morning. I will try to add some color to a rather grab quarter. First quarter of 2015 revenues decline to $393 million compared to $470 million on last year's first quarter. We earned $1.7 million or $0.03 per fully diluted share compared to $10.8 million or $0.21 per share last year. As Brian has discussed, our total decrease in revenue of $77 was due primarily to poor weather in the Midwest and Texas Gulf Coast region. As well as completion of projects that were active in the prior year. The revenue decrease with $48 million in our west segment, $46 million in our energy segment with an increase of $17 million in our east segment. In the west, the completion of a large solar project reduced revenue by $58 million compared to the prior year. While the completion of the BridgeTex pipeline project reduced revenue in the energy segment by $37 million. The poor weather inhibited our ability to make significant progress in replacing these two jobs. For example our Sasol project which will far exceed the combined revenue of these two jobs generated revenue of less than $15 million in the quarter. For the quarter, we derived 13.9% of our revenue from a large midstream pipeline company and our second largest customer was TxDOT with 10.9% of total revenue. Gross profit was down $12 million for the quarter. Both as a result of a lower revenue and the impact of weather that Brian discussed. The gross profit decrease with $10 million in the West segment, $4 million in the energy segment. While gross profit in the East improved by $2 million. The gross profit reduction did not arise from the ending of the two large jobs for which we recognized no profit last year. Instead the gross profit decrease was $4 million a Q3 C reflecting our inability to perform any meaningful work in the first quarter because of the weather. The gross profit decrease was $6 million at Rockford reflecting a favorable settlement of change orders for a large pipeline project in the first quarter of 2014 and the gross profit decrease was $5 million at Primoris Energy Services reflecting the impact of two pipeline projects construction of a large fertilizer facility all of which were completed in 2014. Gross profit is the percentage of revenue in the quarter declined to 9.7% from 10.6% in the first quarter of 2014. During the first quarter depreciation was $13.9 million and amortization was $1.7 million. Our intangibles balance at the end of the quarter was $38 million and we expect to amortize $4.7 million during the remainder of 2015. We spent $16.6 million on capital expenditures and received $2.8 million from proceeds of the sale of equipment of equipment. For a net CapEx of $13.8 million, we anticipate for the full year our net capital expenditures will be somewhere in the $65 million range. The effective tax rate for net income attributable to Primoris was 38.7% and we do not expect the rate to change materially for the remainder of the year. Our balance sheet remains strong with $173 million in cash in short-term investments at the end of the quarter. Our total debt was $246 million resulting in a 53.9% debt to equity ratio. The weighted average interest rate in our total debt was 2.7%. At quarter end, we had $299 million I net accounts receivable. We remain in dispute resolution, mandatory arbitration in one case and a lawsuit in the other. With two customers over collection for two construction projects completed in 2014. In April, we received $11 million from one of the customers reducing the total receivable amount for the two projects to $51 million. At this time, we cannot predict when the disputes will be resolved nor the timing of any additional collections and potential future profits. Our cash flow from operations in the first quarter was $2 million. We will continue to use our cash to invest in equipment, make acquisitions and pay dividends. The board's decision to increase the quarterly dividend by 37.5% should demonstrate our confidence in our ability to generate strong and consistent cash flow. During the quarter, we invested $23 million to acquire the assets of Primoris AV. And so that we retain the ability to quickly complete an acquisition. We recently added $50 million capacity to our shelf facility. Total backlog at quarter end was a record $2.1 billion consisting of $1.7 billion a fixed backlog and $456 million of MSA backlog. Our fixed backlog includes only contracts for which we have a known revenue amount. Well our MSA backlog includes four quarters of estimated MSA revenues. By segment, total backlog with $849 million in the west, $963 million in the east and $332 million in the energy segment. As you may have noticed, in the other financial section of the press release. We added a sentence which is our first attempted guidance, since we became a public company in 2008. Based on the current projects and backlog anticipated level of customer maintenance and MSA spending. We expected the 2015 revenues should approximate 2014 revenues of $2.1 billion. And that 2015 earnings per share should approximate 2014 earnings per share of a $1.22. Unfortunately, we are starting the last three quarters of 2015, $0.18 below where we were at the end of the first quarter in 2014. So we do have a challenge ahead of us. With that, we will now move on to your questions.

[Operator Instructions] our first question is coming from the line of Lee Jagoda with CJS Securities. Please proceed with your question.

So just looking at your guidance specifically the EPS guidance. It actually implies flat to slightly lower margins on average for the balance of the year and given that there were a number of operational headwinds last year specifically related to the two projects, where you had difficulty collecting. What's causing the additional caution or pause on a year-over-year basis?

Well it's not only the margin that you're looking Lee, you also need to remember that we had a $5 million, little bit over $5 million gain last year on the sale of Westpac. So that's a reasonably significant impact in the total dollars. I think we're at a point right now that we're trying to be cautious recognizing that we have quite a bit of work to do, to get to the $1.22 and it is a number out there, which means that of all the numbers we hit, that is not it. But our goal is obviously to do better. But it's going to be an interesting year.

Everything impacts that Lee, is that we've got some larger projects starting up and we're pretty conservative that our revenue recognition on larger projects at the start of the front end and not knowing, how they're going to turn out, so we've got a lot of big stuff starting up.

That's very helpful and Pete just on Sasol, how is the backlog split up between the east and the energy segments on the Sasol piece?

We have so far recorded $290 million, $125 million is energy and whatever the different is $175 million that didn't add up is the other piece and Kate is telling me, that I got them backwards.

No, you did say energy. The larger component is the industrial. And there was about $40 million difference, but keeping mind you know, when they gave us this purchase we had given them budget estimates. Well in excess of what the purchase orders is, but they wanted to keep purchase orders under $300 million, so there was no purchase order. So they said, in previous call, we anticipate the numbers and get quite larger than that and then there is slightly bit of service because they're still kind of broken around and how they want to execute this product. So there is a quite a bit of services that we think, we can pick up in excess of that. So like pipe fabrication and equipment setting things like that.

Okay, I think if I heard you correctly in the prepared remarks, the energy piece will be first and then the industrial piece would be later stage, is that right?

The Heavy Civil piece or the I&M piece will be first. They're basically importing I don't know how many millions yards of dirt from offsite and they had put the dirt in place before the industrial group, the energy group comes in and installs the foundation and things and then the ground piping.

But if I look at your backlog and your expectations for backlog for the balance of the year. It implies that the $125 million in energy even though with later stages, it's expected to be completed this year. Is that to say, that the entire $290 million would be completed this year then?

No, it's a 22-month, 26-month job for both entities.

Right, but again in the energy portion of your backlog discussion. I think you say 98% of that backlog is going to be completed over the next 12 months.

For that job specifically?

In total for energy.

Well yes, that job is in should be less.

And it's also 12 months which gives you in the next year, but.

Well keep in mind, let me go backwards a minute. The purchase orders in aggregate for $290 million, we anticipate that the job is going to grow substantially from there based on the unit prices and the numbers we gave them. So to say, 98% of that will be done in the next 12 months. Would imply that, only 98% of only that portion of the work will be done in the next 12 months. So if the job grows by 100% then 98% half of it would be done in the next 12 months. You got me?

I do and that's exactly where I was going. I appreciate, I'll hop back in queue.

Thank you. The next question is coming from the line of Tahira Afzal with KeyBanc Capital Markets. Please proceed with your question.

The first question is, you know that $1.22 guidance first of all, thanks a lot that's very helpful. I'm sure, it's laid some fares today given the quarter. It seems like you're putting in that your estimate for MSA's. But I guess a couple of things I'll have to get some color around in terms of what's included and what's not. Number one, claims, recoveries from stuff you have outstanding. It seems that, not built in I assume and you know to the extent you win new projects well not MSA works, but projects. Would love to get a sense that what you're looking at in the pipeline could add to that $1.22 to some extent as well.

I'll answer the first one. No, we're not expecting in these numbers. We're expecting at best minimal recovery of the amount that's out there, that's in dispute. I'll let Brian answer the question about. What he's looking at in the pipeline?

Well I want to point out to something you said there was an increase a substantial increase in MSA anticipated revenues. We haven't changed any policy, so we've used the same. We're very conservative. We only recognize you know the 1-year, we see alluring to us, through MSA work and that's very conservative. We have some MSA's with clients that we don't do any work under because they just, it's a license to do work for them and they don't give us any work. But we don't include any of that, we're very confident that we'll meet or exceed those MSA numbers when we put them in our backlog or we put them on our estimate. You know there still a lot opportunity out there. The West Coast continues to grow and the PGD work that we picked up. In essence, two new lines of business with them over the last quarter or two. One of them you know, they're now beginning their Aldyl service replacement which we talked about laboriously. And also, we picked up this, we call it TV of drilled services. When you drill hole to put a new service into the ground, you run a small TV camera inside of it to make sure you haven't drilled through anything inadvertently you don't want to drill through. Now that could be a great expanding business for us, it's with a good client. But the larger component of the work is the outdoor services and we think that those services are going to grow dramatically from, based on what we know and our experience with the copper services that we performed for them. We think that work will grow dramatically. Q3 C is at a great run, they're picking up new clients, they're picking up new geography and a lot of the new MSA work, we have is coming from them and their clients continue to have build outs, continue to grow, continue to have issue with integrity and trying to prove us the integrity and replacements in their system. So that's been a big boost for the MSA work. We continue to grow those businesses. Our management is as strong as anybody's in the business. I'll look for them to add new MSA work. Sprint was not just no longer Sprint incidentally, we have to give the name back to the people we've purchased it from. But Primoris Pipeline Services they do quite a bit of MSA work too. Their model is to do about 50% of their revenue from maintenance and that's all done on MSA work. A lot of that's fairly unprofitable. But we're combining that, they reached out the geographically and picked up the middle Atlantic. They continue to grow and we think, we'll see more and more MSA work from them and those clients as that integrity issue hits them and then the new built out because a lot of these geographies that we're in by design are in the [indiscernible] which are exhibiting great growth and that growth means utilities have to serve them and so that means a lot of new package is to come out. So we're in the right area, with right people. We look for that business to grow pretty strongly.

So I mean, Brian, Pete in summary. I mean it seems MSA's feel comfortable around in terms of what you put in that $1.22 and if your backlog pipeline and prospects is strong, does that add potentially to that $1.22 is the incremental work you're booking from now on, could it come in fast enough to really add to this number.

You guys have been on me for years, to give guidance. So I give guidance and you want me to drill down below that. We're fairly comfortable with the number we gave because you know us we are very conservative. One of the reasons, we gave guidance is because we looked around at our peers and they're only a couple of us that didn't give. So we're reluctantly going down this road and we know, we've had some probably volatile results over in the last three, four quarters and we want to make sure that we take care of the guidance that feel strong enough to own our stock. But we're comfortable with where we're going. It's a drill down below that, I don't think it's appropriate.

Fair enough and I'll just ask one follow-up. You know Brian, even yesterday utility client announced that they're going to be awarding up $5 billion pipeline project of summer. So we started to see some of these mainline projects roll out, when you look at your M&A pipeline are you sort of refocusing in that area, some of the energy sort of prospects out there. Do you want to diversify going forward?

We got a fairly full play to prospects for the pipeline group. Part of your problem is there, it's pretty lumpy. You got a huge amount of build out coming in 2016 and 2017 and even in a little end of 2018 and that's all kind of related. Which is you know the announcement of the job, we have in Florida which is 2016, 2017 work. There is work north of that, that has to be completed to provide the gas going to that part of Florida. So and that's a huge project. But you know guess what, it all has to be built about at the same time. We have our traditional clients, as I've said in the past. We live by the mantra, never trade an old friend for new one and we're going to take care of those guys. We're not really looking to expand that business tremendously but obviously those side booms will lay pipe for any clients out there. So we're going to continue to revolve through the clients and gravitate towards the ones that have work. But never will we ever give up an old client or provide poor service and old client to take out a new one. Which you know I'm speaking to the guys like Williams, which you do a lot of work for up in the Northeast. So you know we'll get our share, we always have, Rockford is an extremely competitive company. They know what they're doing. They're true journeymen, I mean that's why we bought them. Didn't like to compete with them and so I've a very high confidence, we're going to get more than our share of the work, no matter where it is or who the client is.

Thanks a lot folks and I'll jump back in the queue.

Thank you and the next question is coming from the line of Jason Wangler with Wunderlich Securities. Please proceed with your question.

Just curious, you were talking a little bit about the energy work kind of firming up as we'll kind of get used to these oil prices and I think you also said, that it was obviously going to be more competitive. But can you just talk about what it looks like as far as have you seen more, things kind of come to bid or at least you know more interesting getting things done and then just, how it's looking from your side as far as your competition and what you're seeing is it a price issue, is it a timing or where those pushes and pulls are at?

That's a good question, Jason. It's a mixed bag. On the larger pipeline work, you're not going to see a lot of jump into that business. If there is always so many contractors that are capable, that are equipped, that have the people. I would shuffle when I hear these guys talk about how many spreads they can stand up. It's better equipments is pretty worthless if you don't have the superintendent to people to put the pipe together. The major pipeline business as I think, there is enough work out there. The prices are going to hold and we're going to continue to see a good market. The major industrial work particularly in the ship channel in the Southeast through the Baton Rouge area. It's a little bit of a mixed bag, I think the larger projects again you have the fewer big dogs that can do it. I think the clients are driving little harder bargain, even the ones that aren't subject to the price of oil. There's been some hesitancy and I think that's kind of stuttered everybody just in the fact that, nobody knew for sure, what the price of oil was going to end and we still don't. I mean, somebody asked me, well this is a very precipitous drop in the price of oil and I said, I've never seen anything but that. They're always precipitous up, they're precipitous down. These things don't move slowly it seems like. We're seeing some issues is on the smaller work. Where other contractors coming out of the oil fields. Things like that, we'll try and solicit work for a more traditional clients. Smaller jobs, maintenance, things like that they weren't competitive or didn't want to try and compete and prior to that. And so we're seeing more guys that we've never heard of show up on jobs, walks and things like that. The more astute clients won't give them the work, some of the guys that aren't or they're just low ball guys. We'll give them some work even though they're not qualified or they don't have a track record. But in general, we're seeing a little downward pressure on pricing terms or about the same. I look at terms as taking a pricing the clients haven't gotten a lot tougher on terms. You have few of them saying, hear the terms, take it or leave. But traditionally those are the same guys is that always been. So you know in general, our price seems maybe got a little downward pressure, but I don't see them being dramatic. We have a lot of clients bragging about it and particularly the producers are saying I'm getting my services for 30% less. We're not going to do that and we haven't had to, to get the work based on our reputation and our relationships. But there is some pressure, I won't deny that.

That's really helpful. Thanks and just maybe, you mentioned also the LNG working you guys kind of still working on those small scale LNG projects. Are you seeing much of an uptick, given what we've seen with what's going on in oil and things. One way or the other in terms of interest in those projects because you obviously have been talking a lot about, how those can be pretty lucrative. At higher oil prices or anywhere else.

Well you have three kind of distinct markets at play right now or you did. One of them was the transportation, if you go for the guys like clean energy and people like that for trucks and trains and things and then you have the marine market. Based on EPA requirements at these boats meet air pollution standard. A lot of conversions, they're going to have to occur on the existing boats and engines. And then you have kind of the oil field market, where you had guys like the Stabilis looking to power their fracking operations and things like that with LNG, with flare gas. It's a good use for that gas instead of making CO2 was it buy burning it. The fracking business, so far doesn't seem to be as greatly impacted as you would expect. We're still talking to guys about performing projects in that space. The transportation business really is been quite dead except, I think there would be a great impetus at some point for high horsepower transportation like trains and things like that. But that's still in the making because those are major conversions that have to occur and that's not regulatory driven. But the marine business is regulatory driven and that has stayed strong so we continue to see a fairly good demand for a wage out in these small plants. You know since we've been pretty successful ability. I think we have the process pretty much dialled in. I truly believe we are the preferred provider of these plants. So other than that, I really can't see a general trend one way or the other, but we're still very optimistic our services are in need.

I appreciate the color, I'll turn it back. Thank you.

Thank you. Our next question is coming from the line of Mike Shlisky with Global Hunter Securities. Please proceed with your question.

I just wanted to clarify, something from an earlier question, and this was asked three different ways. I want to ask it, the fourth way here. Your guidance actually put out here in your release. It says that, based on your current backlog. So if you were to book anything else this year and break grounds on it. Does that represents upside to your current estimate or is it basically a $1.22 assumes you'll win a few more things as you go through the rest of the year?

The intent of the $1.22 is not to make it so precise to you know that you think that is a number, that we have totally gotten down to the very penny. I think that if we were to get something significant that we could put both in the backlog in the start prior to the end of the year, you could see that $1.22 improved. I think that bigger challenge will be that for us to get any significant project and have them contribute to this year would be quite challenging. If you look at an industrial power plant. If we win one of those awards, we certainly aren't going to see a lot of revenue and profitability out of that. This year, but it will make the backlog look great going into the next year. So I think that if we announce something significant that didn't star fairly quickly, you're probably not going to see much of an impact on the $1.22.

Yes and I wouldn't want you to take every job announcement we make as accretive. I mean we've anticipated normal awards throughout the year, the smaller projects that we normally get. So don't read every announcement we do and add up to that $1.22. You might be pretty disappointed.

Sure, got it. I also want to ask about something I think you said during your remarks, Brian. Where there customers that are not in oil and gas that are also giving you some pressure on our pricing because they kind of feel that, they can kind of take advantage of the current environment, is that what you're trying to get out and if so, are you at some point just kind of [indiscernible] which is just too low of a price for us right now.

We bid our price when we did work, we obviously respond to the market and we're able to cut better deals, when you have the kind of our suppliers who are focused in the same industries. But we bid to the market, but I don't think we get down to the point. We're not actually, even been to point where we walk away from work. If they don't like our price then don't like our price to give it to somebody else. There are a few customers that are ancillary to the business and our subject to the price of oil and gas. That really some of them actually make money when the price of oil goes down because they're dependent on gasoline to run their trucks or diesel to run their trucks, but there are some ancillary that have used it as impetus to try and drive prices down from their suppliers. Yes, that's for sure.

Okay, just one last one. I wanted to touch on your Cardinal wastewater business. You had mentioned you're looking to take that business in grow the revenue with some new stuff about there, new projects and whatnot as long as you can tell us a little more color as to what's out there and where do you want to take it from here?

Well I don't want to get too specific, the major thrust that we've done with Cardinal, you know Bill McDevitt did a great job for us and he's retired now and we've got Mr. Holt now and he's doing a great job. His experience is more on the higher end and more expensive project, more design builds. So we're going to exploit his experience better although, Bill was pretty at that also. I don't want to say anything bad about Bill because he's a great partner and I won't say anything bad about him. But our growth is trust in two different directions. One of them is geography, we're bringing more and more work across the south east not just in Florida and secondly, we're going bid larger projects with the wrinkle of design-build. When you go upscale, when you go to the larger project, you end up with fewer competitors because of all the little guys can't right bonds and things like that or they're financially in capable of doing the larger jobs and then the suppliers because a lot of that business is based on supply cost. Your suppliers will give you a better price because they know they're going to get pad versus a smaller guided this is doubtful. So a geography and larger projects is the trust for taking the business. But it was pretty process Southeast.

That's great color, thanks very much. I'll pass along.

Thank you. Our next question is coming from the line of John Rogers with D.A. Davidson. Please proceed with your question.

Couple of things and you've gone over this a little bit, but maybe then try it again. In terms of the way the 2015 plays out, the weather impact, the oil impact and now you've got prices coming up. I mean Brian does this snap back very quickly into the second quarter. Did you just push a lot of revenue in earnings out of couple of months or is this make it up through the year and ran through year because directionally profitability is been trailing off and I'm just trying to understand how you see this recovery happening?

Yes, you know it's god didn't part the clouds and the rain stopped at the end of March. You know it dribbled into their second quarter and then you have the cold weather Q3 C which is a great contributor they kind of begin to accelerate in the second quarter, but they're not at speed. You have some clients that are going to get their money spent which means this really going to get crowded towards the back half of the year like your utilities. But in general when you have jobs that get hit with weather in general, the schedule just gets pushed out. So you don't hear, you don't see a great acceleration on, highway work or because you get a day for day for on the rain. So you don't see this great acceleration. So it's kind of mix bag. I don't think you'll see a vigorous snap back and you know the problem is, a lot people don't realize is when it rains on a pipeline job, you're out that day. You can't work, we have to pay the workers anyway because they're living out of town in trailers and or hotel rooms and then it takes your couple days to get back up to speed because the ride away is muddy and wet and soggy and if you get kind of recurring rain, it's even worse because it just never dries out and fighting mud is an efficiency issues as well as schedule issue. So I think what's happened though in a broader sense is you've got the clients that have put their projects on delay because of the uncertainty over the price of the hydrocarbons or the way they interact with each other. And take them along and get those geared up again possibly. If they're committed to go at this price. For two reasons, once you slow something down it's hard to reaccelerate but secondly, as we've talked about many times. The engineering side of the business is really stressed and to stop engineering or slow engineering down and then to restart it, trying to accelerate it will be a difficult task for these guys. But so it's' a mixed bag. I think it will push it out, but some of will be accelerated.

Okay and then in terms of the recovery that you mentioned or settlement in the quarter. Which project was that related to, can you say and how much is because you had two big clients there and I just wanted to get an update on.

We collected the retention on the BridgeTex job, the $11 million.

That was a non-P&L issue though.

Yes.

Okay.

Yes, we haven't settled anybody, so.

Okay, all right to the P&L impact and.

It was not a P&L impact.

And Pete that's not included in any of your comments relative to 2015.

At this time, if they're, we'd love to be able to make it additive to the numbers that we gave, but no it is not in that.

Okay.

Because the only impact the quarter was ongoing legal expense which were pretty efficient at these things. We've done enough of them, where we keep the cost down, but it does have an impact obviously.

And then Brian in terms of your comments on M&A and opportunities out there, I mean it sounds like you're at least in some discussions. Are you seeing better opportunities in your existing areas of expertise than whether it's the pipeline in the civil work or but in the past you've also talked about getting into some new markets where you thought there was growth over the next couple of years?

Yes, no I don't need to be flipping John. We've been only looking at smaller companies because of the large multiples and large valuations over the last couple of years. So the downturn in all the larger companies in the public market, which ultimately kind of sorts down to the smaller companies in the private market, where the larger companies in the private market because evaluations, we just haven't been to look at these larger companies because we just didn't want to take the dilution and we just didn't see where the numbers makes sense on some of these deals. Well the numbers make sense pretty much across the board. To be honest with you though, I'm not you know there are few areas we're not currently in, but there aren't too many. So most of the business as we're looking at or kind of in our areas of expertise or small expansions of that or small step outs of that. But we're seeing great opportunity across the board. You've got guys that you know at my age and they don't know whether the opportunity to sell their company at 10 or 11 times is even going to be there again. They don't want to 10 years, when they're 65 years old. You see there is all kinds of reason, John. You know when you have these kinds of downturn, it financially stresses a lot of companies even good companies because they've grown, surpassed and so much because their balance sheet hasn't stayed up with them and they understand the risk now, that they're seeing some other clients. We're seeing the first small iterations of bankruptcies in some of the oil producers. So we're looking across the board, but I think the big change for us is the lower valuations is going to allow us to look at larger companies and that's a real positive for us. I got a friend in the business, so he says you make your money buying something not selling it and you know there is opportunity now to buy good companies that did well. Some of them in the oil and gas business, some not in the oil and gas business and we're going to weigh that of course because we're pretty concentrated in energy. But the opportunities here, we're going to take advantage of it, we're good at it. People like doing deals with us because we're honest and we do the deal and we don't jerk the around and bait and switch and we write the check and there are people, who love working for us. So we're a good buyer.

Okay and then how far away are we from some power projects?

You know there are some that could go be active by year end, some of them will be in engineering by year end that their prospects. We're doing bits and pieces now with the Saxon's and those people. A lot of the power, the immediate prospects or refiners and chemical processors who want to generate their own power and then sell it over the fence, when they don't need it. But we can see bits and pieces by the end of the year in engineering or any construction, but I think the big surge is going to be for second quarter of 2016.

Okay, thanks a lot. I'll get back in queue.

Our next question is coming from the line of Dan Mannes with Avondale Partners. Please proceed with your question.

So I'm not going to ask about guidance, so I think you've already, but we've belabored that. Let's talk about a little bit about the bidding side. So you guys did announce the Florida, Southeast contract. You know it's kind of interesting to us that it doesn't even start till mid to late next year. So could you maybe talk a little bit about the pricing structure given the fact that the project doesn't even have a final route. And then two, can you talk about maybe some of the implications as it relates to bidding generally, when you're seeing the developers bidding this far in advance?

Well in terms of pricing, we got as much as we could. I mean that's kind of our motto. We've been working with these guys for a while, they're out somewhat selected. It's fairly wide and where the pipe will go, but that's kind of advantageous for us because we can have input on route selection which can save the client money and obviously save us money. So but in general we kind of know where the route is. We're doing a lot of projects like that, where you don't exactly know where it's going to go. We have one client that picked out every rock on ride away and put the pipe right through the middle of it, but you know that wasn't a very good job for either one of us. But it's a bit of a struggle they wanted to make sure we were committed, they worried about capacity in the contracting community. So we've got some fairly aggressive terms. If we don't move forward with them going both ways. If don't build it, we get paid, if some money not the whole thing obviously. If we don't build it for them, then they get paid. So that indicates that the business is going to be pretty frothy into that year. But we've got a lot of on that way and they were very good to work with. They had some units that they work to sure about that we add in the contracts. So cannot do one of our jobs and we so do exactly why our units, where they were or where they were and they were pursued under that and so we were able to work out a very fair agreement with them They're historically very fair, we've done a lot of work for them over the years. So the rest of it will be traditional, but you know you're just going to have a really rambunctious market in 2016, 2017 and it's going to be fairly good this year. We could use some more work in the second half. I'm working hard to get that and typically, as you know Dan you follow pipeline business as good as anybody. You don't have a lot of work that's going to burn off, unless it's a big project. You book your work now and you're burnt by the end of the year in that business.

Got it and then real quick on the power plant side. Obviously there is a big job, we're waiting on the regulatory side off. But outside of that, can you give us a little bit more color on what some of these guys are looking at and maybe some of the things they're looking at outside of power in the broader industrial sense in California.

Well Chevron won their legal battle with the project in Richmond and so they're talking about on reinvigorating that. We'd halfway completed the hydrogen plant there for Praxair. And you have that coming down the pipe. We've done a little bit of work kind of re-inventorying what's there I mean, it's been sitting there 4 years, 5 years now I guess. So you've got that project, you have some other refinery work that needs to be done out there. You got some small power plants if they want to build in several of them that we're pursuing. Very few contractors work power and refinery and in the refineries, they want guys that are attuned their safety and how to work in an existing plant, while your power guys are out there building Greenfield plants and don't have that safety awareness and history. And since we have good relationships with all the refiners and the power guys, we're in a good spot. You got some, you got lot more power to come. You're talking about the Carlsbad one which just really California showed their dyslexic [expletive] on that one. It's just really silly to process that they're going through out there. But we're confident they're going to reach resolution and maybe build a project there. Albeit a bit downsized, but there are still a lot of replacement and rehabilitation that needs to be done, repowering that needs to be done in that market and there is several developers that play in that market and we're preferred guys with most of them. So imp' pretty confident, we're going to get our share but if they follow the path that this Carlsbad project has, you know only god knows when they'll ever get kicked off. I guess when we started to have brownouts outside, there again there'll be on, that sort of kicking off.

Understood and then one last quick one for Pete. I think there were some comments that relates to the energy segment there was maybe a project deferral that resulted in a payment to you. Can you give us a little bit more color both on the project and the sizing?

Be specific, Dan on the issue.

Yes, this is in the PR, in your press release there is commentary about. You guys benefitting I think from a project deferral.

Oh! I'm sorry, yes it is a project, a heater project for OnQuest. And the owner decided to delay the project in a next year or suspended actually and that project we were able to pick up some cancellation or some suspension charges to pay us for the parts that we had already bought and it's kind of surprising because it's a refinery project and we're kind of surprise that we're suspending it. But we were able to get all the fab paid for.

Got it. Thank you very much.

Thank you. [Operator Instructions] our next question is a follow-up coming from the line of Tahira Afzal with KeyBanc Capital Markets. Please proceed with your question.

Brian, I just a couple of follow ups on the end markets to gain. We started to see some midsized LNG projects coming out. I know you folks are bidding and I think have a won a portion of a pipeline and on the West Coast in the Oregon as well, tied to that. So can you talk a bit. I know the bookings for some of the larger guys might be ebbing out. But you know that typically follows the lag in terms of your fabrication services on the pipeline industrial side. If you really couple [ph] some of the midsized activity. With maybe some sub contract on some of these large jobs. We'll have to get an idea of where you directionally see that backlog headed over the next year versus where it might have been at this time last year.

Tahira, this is David King. If I can, I'll try to address that. On some of the larger LNG projects that we're seeing in the Gulf Coast area. We actually see that work coming from us in really three main areas and we've obviously been bidding that as sub contractors to some of the larger EPC organization. One of the bigger areas we see is obviously in the I&M work that Jonas does a lot of dirt work that has to be done. We also see in the Conrad's area on the industrial side because we're getting a lot of opportunities that are cropping up there and then the pure fabrication side as Brian mentioned. We have our Ram-Fab but we also opened a new shop in New Iberia. We actually see that work also picking up. Relative to your question on the pipeline side. We also see those pipeline feeds to a lot of those faculties the spurring opportunities for us on what we call now, our Primoris Pipeline Group which was Sprint and then obviously some potential on our Rockford pipeline moved also. So those are areas that we're tracking pretty carefully.

Got it, David that was pretty helpful. Thanks and does the Ram-Fab or the New Iberia facilities can they do pretty advance steel structure is there a chance, you can even do tank work or that would be out of the realm of what you guys can do?

In those facilities at this time, that would be outside of the realm of what we could do. Those facilities right now for us or more in the pure pipe fabrication and some modular capabilities.

All right and David and last question there. Who do you end up, I assume CB&I is the big fabricator out there, but would love to get a bit more commentary from you or color on who else really competes with you there. It's there more mom and pop stores or you know if your competition move some of the larger folks out there, that it might be private.

Well on the type of the work we're talking about there is, it's more the mom and pop and smaller entities. CBI is not the only entity that's obviously we're looking at, the KBR. A lot of LNG companies out there that do LNG work. So we're getting opportunities cropping up from each one of those entities.

Thank you very much.

You've got guys like four of them become program managers like on Sasol that will parse out the work too, but the biggest one is obviously CB&I with their Shaw acquisition that really put them in the pipe fab business in a big way.

Got it, thanks a lot folks.

Thank you. It appears we have no additional questions at this time. I would like to turn the floor back over to Mr. Pratt for any additional concluding comments.

As customer, I'd like to thank everyone for their participation in this call and their interest in our company. Our results may not be as you'd hoped, but I assure that men and women in Primoris Company are working very hard to make you as proud of them, as I'm. Good bye.